By J.K. Wall
Indianapolis Business Journal, April 6, 2010
Saying WellPoint Inc. has failed to live up to its commitment to provide “the best healthcare value” for customers, three shareholders of the Indianapolis-based health insurance giant want it to convert to a not-for-profit organization.
They have proposed that the company study the feasibility of such a conversion. The proposal will be voted on at WellPoint’s annual meeting of shareholders in Indianapolis on May 18.
The proposal was disclosed Friday in WellPoint’s proxy statement. The three shareholders—Rob and Karen Stone of Bloomington and Julia Vaughn of Indianapolis—will stage a press conference about the proposal Wednesday morning in front of WellPoint’s Monument Circle headquarters.
“WellPoint has had a heap of (well-deserved) bad publicity lately about their corporate culture of greed,” Rob Stone, an emergency physician at Bloomington Hospital, wrote in an e-mail. He referred to recent controversy over WellPoint’s premium hikes in California, Indiana and other states, and to Friday’s report that its executives enjoyed boosts in compensation last year ranging from 50 percent to 75 percent.
WellPoint’s board of directors urged shareholders to vote the proposal down.
“The proponent of this proposal has not presented any factual information to support the view that converting to nonprofit status would benefit us or our shareholders, employees, customers and members,” the board members wrote in a statement in WellPoint’s proxy filing. They said a feasibility study of the issue “would be costly and would distract management and the Board from overseeing our operations.”
Board members added that as a not-for-profit organization, the company would have poorer access to capital and, by not being able to pay executives with stock, would have a harder time attracting top-level managers.
WellPoint’s predecessor company, Anthem Inc., was a mutual insurance company until its initial public offering in 2001. It was, however, always a for-profit entity. Many of the companies acquired by Anthem or other WellPoint predecessors did convert from not-for-profit to for-profit status before being acquired.
The Stones and Vaughn would like to see the United States adopt a single-payer health insurance system, where the U.S. government would act as insurer for all Americans. Their proposal claims that WellPoint spends as much as 19 percent of its premium dollars on administration and profit, compared with about 3 percent spent on overhead by the federal Medicare insurance program for seniors.
“Although this is good for WellPoint’s profitability and share price, it supports the argument that for-profit health insurance is a major reason for the discrepancy in overhead expenses between the U.S. and other countries,” the shareholder proposal reads. “Nations with universal systems spend about half what we spend on a per-capita basis and have better health outcomes.”
During last year’s annual shareholder meeting, Rob Stone called informally for WellPoint’s board to re-mutualize the company.
[PNHP note: the statement below is the full text of Dr. Stone’s statement of April 7]
Press Conference Statement April 7, 2010
People ask me, why should WellPoint shareholders vote for the proposal that the company explore returning to its traditional Blue Cross, charitable, not-for-profit mission?
The reasons keep coming out in the newspapers, and let me mention a few from the last 12 weeks.
The Indianapolis Star on January 16 exposed that WellPoint has been covertly funding U.S. Chamber of Commerce attack ads against health care reform. WellPoint spent tens of millions on other non-covert lobbying. Keep in mind that the bill recently passed was largely written by former WellPoint Vice President Liz Fowler in her role as Max Baucus’ chief healthcare legislative aide.
McClatchy Newspapers on February 24: ”While Anthem Blue Cross proposed a 39 percent rate increase on thousands of its California customers, its parent company gave 39 of its executives more than $1 million each and spent more than $27 million on 103 lavish executive retreats, congressional investigators said.”
The Los Angeles Times on March 10 updated its readers on the ongoing rescission scandal involving WellPoint in California. “Only a small fraction of eligible Californians have benefited from agreements that Anthem Blue Cross made to settle accusations that they systematically and illegally dropped sick policyholders to avoid paying for their care.” These were people whose insurance coverage was cancelled after they were diagnosed with cancer and other serious conditions.
The Los Angeles Times again, on March 18 reported that in 2007 WellPoint had pledged through its charitable foundation to spend $30 million over three years to help those lacking health coverage, but its tax records and website show it gave only $6.2 million.
Consumer Watchdog reported March 31 that WellPoint sent a message to investors describing how it would simply re-label administrative costs as “medical care” in response to the new health reform law. The message follows revelations that WellPoint, also intentionally padded already huge premium increases in California, just in case regulators demanded reductions.
Also on March 31, Revive Public Relations released the results of its fourth annual national payer survey of hospital executives. Survey results showed a marked decline in WellPoint/Anthem’s reputation, now 2nd worst of all health insurance companies in their study.
And now this week the news of CEO Angela Braly’s 51% salary increase, up to $13.1 million. The arrogance is overwhelming. Why wouldn’t shareholders be concerned with the direction this company is heading?
Yesterday afternoon in Bloomington I listened to Allan Hubbard speak on health care reform at Indiana University. Mr Hubbard, an Indianapolis businessman, served in the GW Bush administration and is a recent member of WellPoint’s Board of Directors.
He made no bones about being a Republican and shared a Republican view on where health care reform should go from here. At the end of his talk he concluded with this prediction: “My guess is that in 15 years we will have a single payer health plan, Medicare for All.” He wasn’t saying that gleefully.
He explained that all the health insurance companies do is serve as middlemen between patients and providers, (doctors and hospitals). He fears that as health care reform moves forward, Congress and the people will turn on them as a way to cut spending.
They (we) should. The health insurance industry adds huge administrative costs to our system, not to mention the profits they siphon off. WellPoint is a parasitic middleman that adds no value, but actually increases the cost of healthcare for all of us.
I see the day when socially responsible investors will divest themselves from health insurers’ stocks.
My recommendation is that WellPoint investors look at drastically changing the
direction of our company, and not wait for the stock price to plummet once the public figures out that insurance companies should go.
Rob Stone MD
Director, Hoosiers for a Commonsense Health Plan (http://www.hchp.info/)
State Coordinator and national Board member, Physicians for a National Health Program
Assistant Clinical Professor of Emergency Medicine, Indiana University School of Medicine